The withdrawal represented a devastating blow to Murdoch, who had desperately sought to take full control of BSkyB. If the deal had gone through, it would have been the biggest in the history of News Corp.

Murdoch's retreat was also a seeming admission that the scandal surrounding his British newspaper division has shown no signs of abating. The suspension of the bid came after the British government, which had previously given every indication that it wanted the deal to progress, dramatically dropped its support for the bid on Tuesday in the wake of the ever-deepening scandal surrounding News Corp and its UK subsidiary, News International.

The decision to withdraw the bid is the second stunning move Murdoch has made to stem the crisis at his company. Last week, he shut down the News of the World, the 168-year-old tabloid--and the highest-circulating newspaper in Britain--where the phone hacking scandal has been centered. But since then, the scandal has widened to encompass nearly the entirety of News International, and the politicians who once courted and feared Murdoch have turned ferociously against him.

In a statement on Wednesday, Chase Carey, deputy chairman and COO of News Corp, said that, although the company "believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate."

News Corp will keep its 39 percent stake in the broadcaster.

BSkyB revolutionized the British media landscape when it was founded in 1990 (with Murdoch as the lead figure in the company). It has since become the largest pay-TV broadcaster in Britain. Gaining full control of the company would not only have boosted Murdoch's bottom line; it would also have substantially increased his foothold in the British media, where he already controls the biggest share of the newspaper market.

Wednesday's withdrawal does not mean that News Corp. will not make another bid for BSkyB at some point in the future, though that bid would not be likely to occur for some time. (Indeed, a person close to Murdoch told the New York Times Wednesday night that the tycoon is merely biding his time until the public opprobrium fades.) But the proposal to take over the company became an albatross around Murdoch's neck, as people wondered how an organization mired in such a huge scandal could conceivably buy up a large chunk of the media.

Just a few weeks ago, the deal looked to be a sure thing, as government ministers put the takeover on a fast track. The escalation of the phone hacking scandal put an end to those dreams, however, as it revealed staggering levels of criminality and corruption taking place within News International. (On Wednesday, Prime Minister David Cameron informed Parliament that around 9,000 phone numbers were on a list drawn up by private investigators working for News International.)

As the ever-more-sordid details of the hacking scandal became public (murdered girls, terrorist victims, the Queen and even the former Prime Minister's seriously ill child were all alleged targets) the government was forced to retreat, and then to make an abrupt u-turn.

The breakdown of the bid came in stages. As public and political pressure mounted, the ruling Coalition government signaled that it was wavering in its support of the deal. News Corp then asked voluntarily for the bid to be referred to an independent commission, delaying the deal by months. After that, the opposition Labour party said it was intending to put forth a resolution opposing the deal. The government then announced it would support the motion.

Ed Milband, the Labour leader, declared victory. "People thought it was beyond belief that Mr Murdoch could continue with his takeover after these revelations," he said in a statement. "It is these people who won this victory. They told Mr Murdoch: 'This far and no further.' Nobody should exercise power in this country without responsibility."

The vote on the resolution was set to take place Wednesday night. Due to News Corp's action, the vote did not take place, but the debate did. The star attraction was former Prime Minister Gordon Brown, who has accused News International of subjecting him to a ten-year criminal campaign of spying, hacking and conning. In a riveting speech, which was punctuated by loud catcalls from the Conservative benches, Brown said he had been thwarted during his tenure as Prime Minister from investigating News International's criminality.

He said that the company had "descended from the gutters to the sewers," adding, "the tragedy is that they let the rats out of the sewers."

Even with the dropping of the bid, the scandal at News International and News Corp is continuing. News International chief Rebekah Brooks is set to appear before Parliament next week to give evidence about the hacking scandal. (Murdoch was summoned, but is reportedly not attending.) In addition, a public inquiry has been set up to examine the inner workings of News International, as well as corruption within Scotland Yard.